Restructured gas market will facilitate entry of more retailers
Yang Huiwen, Straits Times 11 Sep 08;
SINGAPORE will have a restructured gas market from Monday as part of ongoing moves to liberalise the country's electricity sector.
The business of gas transportation will be split from the importing and retail aspects, said the Energy Market Authority (EMA) yesterday.
This means that all industrial and commercial consumers will share one common pipeline network to get natural gas, regardless of whom they buy from.
This is because all natural gas, whether piped from Malaysia and Indonesia or shipped via liquefied natural gas (LNG) tankers from further afield, will now be channelled into a common distribution set-up.
This network will be owned and managed by PowerGas, the only licensed gas transporter here. It will transport the fuel to more than 120 end-users, from power generators to factories in Tuas and on Jurong Island. A set of rules - the Gas Network Code - will govern the activities of gas transportation.
The one-pipeline-for-all system means that more retailers can enter the gas market, introducing more competition, without having to build their own transportation infrastructure. The changes will impact only the industrial and commercial users of gas.
'With greater competition in the gas and electricity sectors, benefits of competition will flow through to consumers in terms of competitive prices and more choices of electricity and gas retailers,' said EMA in a statement yesterday.
The changes will have no real impact on household users as they are served by a wholly separate system known as the town gas network.
Restructuring the gas market will also help liberalise the electricity industry. Natural gas is cheaper and more efficient than oil and so forms a major component in generating electricity.
About 80 per cent of Singapore's electricity is generated from natural gas, compared with just 44 per cent in 2002. The contrast with 1990 is even more striking. Then Singapore was wholly dependent on oil for generating electricity.
As part of the restructuring, SembCorp Gas, which has diversified interests from import and retail businesses to gas transportation, will exit the gas transportation sector by transferring its transmission and distribution pipeline assets to PowerGas. This will also be done on Monday.
PowerGas will interconnect the two pipeline networks. It is expected to come up with a proposal sometime next year with the integration expected to be completed by the end of that year.
SembGas will recognise a one-off gain of about $25 million over the assets transfer to PowerGas for this financial year, said parent SembCorp Industries in a statement to the Singapore Exchange. However, there will be a 'negative impact of approximately $3.6 million per annum to SembGas after tax profits for the subsequent years until 2023', it added.
Gas market opens its doors with some rumbles
SembGas users fear higher transport charges; customers to gain in long term
Ronnie Lim, Business Times 12 Sep 08;
(SINGAPORE) Singapore's gas market will be liberalised from this coming Monday, the Energy Market Authority announced yesterday, saying that this is expected to lead to more competitively-priced gas here over the longer term.
In the immediate term however, BT understands that some SembCorp Gas customers are complaining that they will now have to pay more as a result of higher gas transportation tariffs. This follows SembGas' transfer of its onshore pipeline assets to PowerGas under the market liberalisation which gives the latter a monopoly on inland gas transportation.
EMA said that the gas market opening will support the earlier liberalisation of the electricity market here by providing a competitive source of natural gas for electricity generation - especially with 80 per cent of electricity here currently being generated using gas.
'With greater competition in the gas and electricity sectors, benefits of competition will flow through to customers in terms of competitive prices and more choices of electricity/gas retailers,' it added.
In the immediate term, the gas market opening means that some of the big gas consumers, including generating companies (gencos), can also trade excess gas which they don't need - for instance, when they shut plants for maintenance - by injecting it back into the pipeline network.
PowerSeraya, for instance, plans exactly that, and is investing $50 million in an interchanger, which when ready in 2010, will enable it to take in Malaysian, Asamera and Natuna gas currently coming to the genco through three separate pipelines and to return the gas from one pipeline to another to trade.
Currently four players import natural gas via pipeline. They are Senoko Power and Keppel Gas which import Malaysian gas, and Gas Supply Pte Ltd (Asamera) and SembGas (Natuna) which are importers of Indonesian gas.
But because Singapore now wants to supplement diminishing supplies from its neighbours, it is building a $1 billion LNG terminal. And to provide an economic case for this, it has given UK's BG Group a monopoly to buy up to three million tonnes per annum of LNG by 2018, or whichever comes earlier, which means that the entry of new gas importers can only come after that.
Separately, SembGas announced yesterday that with gas market liberalisation, it has had to exit the gas transportation business and will receive about $90 million compensation from PowerGas for transferring gas over its pipeline assets.
Additionally, it will receive compensation of $35 million from the government, and a remission of any tax payable on the compensation it receives.
As a result of this, SembGas said it will recognise a one-off gain of about $25 million for financial year 2008. 'It is estimated that there will be a negative impact of about $3.6 million per annum to SembGas' after-tax profits for subsequent years until 2023.'
Some SembGas customers have meanwhile complained that because of the company exiting gas transportation, they now have to incur higher gas transportation tariffs which have gone up to 87 cents per million BTU from 51.5 cents previously, with this resulting in higher gas usage costs.
This is believed to have resulted from the way SembGas - which imports, retails and transports gas - structured its gas supply contracts. The company is understood to be in discussions with its customers.
SembGas has about a two-third share of the 120-130 'medium-pressure gas users' comprising smaller industrial users here, with GSPL accounting for the remainder.
The main gas consumers, of about 6-8 'high-pressure gas users' comprise mainly gencos and big petrochemical companies which have their own power plants.
SembGas hands over pipes
Move will help competition, says Singapore’s energy authority
Esther Fung, Today Online 12 Sep 08;
IF YOU use gas for cooking, you won’t notice anything new, but there is a big change happening in the gas supply business that is expected to benefit Singapore’s entire energy supply operation — electricity included. As part of the Government’s plan of opening up the gas market to competition, Sembcorp Gas is to transfer its pipelines to a licensed operator, PowerGas, on Sept 15.
SembGas, a 70-per-cent owned indirect subsidiary of Sembcorp Industries, will book a one-off gain of $25 million for this year. However, it estimates that there will be a negative impact of $3.6 million per year to SembGas profits until 2023.
With the pipeline in separate hands, the gas market can be opened up to competition. As gas is used to generate electricity, that market will be helped, too, said the Energy Market Authority (EMA).
Currently, SembGas imports natural gas from neighbouring countries, transports the gas through its own pipes and sells the energy to industrial consumers. But from Monday, the business of delivering the gas will be separated from the gas import and retailing business.
All imported natural gas from Malaysia and Indonesia, or liquefied natural gas from elsewhere, will be transported to industrial consumers through a single owner-operator pipeline network. The owner-operator PowerGas will be regulated by the EMA.
With only one operator controlling the transport network, industrial consumers will be able to freely choose from different gas suppliers.
Open competition between gas importers and retailers, whose gas supplies generate 80 per cent of the electricity here, should help keep prices down. Today, about 75 per cent of Singapore’s electricity demand is open to retail competition.
Besides SembGas, another player called Gas Supply is also competing to supply natural gas to power generation companies (gencos), petrochemical plants on Jurong Island and about 120 industrial and manufacturing firms at Tuas.
Household users will not be affected directly by the new gas market. About 80 per cent of natural gas is used by the generators and 20 per cent for industrial use, including the production of the “town gas” piped to people’s homes.
The EMA drew up a Gas Network Code after consultation with industry players. To ensure that there is no commercial conflict of interest, PowerGas, the owner-operator of the pipeline network, will not be allowed to supply the natural gas.
The code includes regulating the tariffs that all gas importers and retailers will pay for use of the pipes. PowerGas has yet to make the rates public.
Today understands that SembGas is still in discussions with its customers as to tariffs under the new gas market. Some of its customers include gencos and other smaller industrial players.
For its exit from the gas transport business, SembGas will receive from PowerGas the book value of the assets with a 40-year depreciation period — estimated at $90 million — plus a separate tax-free compensation of $35 million from the Government.
